Managing finances can be hard enough for older people due to the pressures of a looming retirement, or already being out of the workforce.

Being on a fixed income means financial mistakes can pack a heavier punch, but an ongoing chain of errors could be an early indicator of a serious health issue.

In the five years before a dementia diagnosis, a person’s average credit score may start to weaken and their payment delinquencies rise, New York Federal Reserve researchers found after analysing US credit reporting and Medicare data.

More than 421,000 Australians are estimated to be living with dementia in 2024, and while young people can be affected, it is more common in people aged over 65.

But symptoms of Alzheimer’s disease and other related disorders (ADRD) may be appearing long before diagnosis.

Errors in financial decision making are often among the first noticeable signs caused by early-stage cognitive impairment.

The American research found the financial consequences of ADRD prior to diagnosis steadily increased over time.

One of the most concerning impacts on finances of undiagnosed ADRD was late payments on large debts, such as mortgages and credit card accounts.

The possible consequences include worsening credit scores, along with late fees and interest charges.

“For individuals and households facing a memory disorder diagnosis, simultaneously confronting diminished access to credit … or a heightened potential of foreclosure is likely to substantially exacerbate an already destabilising circumstance,” researchers said.

“Once diagnosed, average dementia-related caregiving and health care costs run in the tens of thousands of dollars annually.

“As such, demand for credit among individuals and households afflicted by memory disorders may increase just as its supply is restricted.”

Racial and gender disparities

The financial impact of early-stage ADRD was at least twice as large on Black adults than white adults, with researchers linking the disparity to Black individuals being diagnosed later on average diagnosed than white individuals.

And while the effects of pre-diagnosis ADRD were similar between women and men, credit scores recovered more quickly for men than women post-diagnosis.

Researchers said the gender disparity could reflect lower out-of-pocket costs associated with formal caregiving for men affected by ADRD, because wives more commonly provide informal care for a husband than vice versa.

It could also be due to the average difference in oversight over household finances between genders, or the differences the effect of living alone versus living with others has on men and women.

Diagnosis makes a difference

The findings emphasised the importance of being diagnosed with ADRD, as the likelihood of payment delinquency fell after diagnosis.

Researchers found there was no decline in credit card or mortgage delinquency after ADRD diagnosis among people who continued to hold such accounts.

This could be because a diagnosis alerted family members and loved ones that the affected person needed support, including with financial decision-making.

Karen Lemay, based in Ottawa, Canada, told CNN she knew something was wrong with her father in 2022 when she noticed piles of late-payment notices and final-notification warnings from service providers and insurers.

The documents revealed he owed $50,000 in charges, interest and late payment fees on a Visa card, and $20,000 in penalties for failing to pay his 2021 taxes.

He had also financed the purchase of a new car he didn’t need, just months before his driver’s licence was taken away; he usually purchased high-end used vehicles in cash.

The discovery was particularly surprising since her father was a former finance executive who was “never reckless” with money.

“I spoke to him about some of his balances and he refused to believe he hadn’t paid them,” Lemay told CNN.

Financial steps for people living with dementia

For Australians dealing with memory loss, it is important to make plans as early as early as possible.

The Dementia Australia website suggests people dealing with a dementia diagnosis should consider factors such as whether they have someone authorised to make inquiries on their behalf at the bank or Centrelink.

They should make sure financial documents – including mortgage, insurance policies and superannuation – are up to date and easy to find.

Seeking help from a financial adviser to plan for the future is also important.

If you have been diagnosed with, or suspect you may have, ADRD, you should also consider appointing someone you trust as an enduring power of attorney, and research ways to protect yourself from financial abuse.